Conditions in the global shipping container market are improving. In recent weeks, demand has plateaued, congestion has eased, and available capacity has increased. Shipping rates have fallen as a result, easing cost tensions for supply chain managers around the world.
This comes as welcome news, given the fact that rates reached “unsustainable levels” earlier this year, according to Maersk CEO Vincent Clerk.
Not all sunshine
However, some industry experts note that disruption could be having a greater effect on freight rates than changing demand. Alvin Fuh, VP of Ocean Freight at forwarder Dimerco Express Group, told Seatrade Maritime News that freight prices rising over the past few months was more closely tied to Houthi attacks in the red sea, and that “Freight rates could deteriorate as quickly as they have increased recently.”
Nevertheless, geopolitical tensions between the apartheid state of Israel, Iran, and Houthi rebels in Yemen (who have been targeting Israeli shipping in the Red Sea) appear at risk of escalating further in the wake of the assassination of Hamas leader Ismail Haniyeh on Iranian soil. Escalation of armed conflict across the region could further throw off balance logistics chains that have weathered almost a year of disruption around the Suez canal.
… and now the good news
Nevertheless, it seems as though a combination of factors around the world are conspiring to lower container freight rates. Total freight capacity will likely rise by around 5% in August, compared to July, mainly due to a 35% reduction in blank sailings. Carriers are reportedly reducing cancellations from 70 to 52 sailings.
According to Drewry Shipping Consultant’s Principal Consultant Hind Chitty, “The recent decline [in freight rates] is likely due to carriers expanding capacity on transpacific and Asia-Europe services (as demand and spot rates surged over the last two months). This drop may indicate that peak rate pressure is easing.”
A recent Drewry report also noted that the majority of major container terminals in Asia are now congestion free. In particular, Singapore recently opened up new capacity (a previously shuttered cargo handling facility) to ease congestion. In the US, Los Angeles and Long Beach have some congestion, and major North European ports are still struggling to manage overflow. Nevertheless, the trend is moving towards cleared backlogs and fewer delays.
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